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before the acquisition, respondent contends that CDC did not
carry on substantially the same trade or business after the
change of ownership. See sec. 382(a)(1)(C). Petitioner claims
that CDC was, at all relevant times, in the contract drilling
business. In support thereof, petitioner claims that CDC was in
a state of readiness and that any inability to obtain profitable
drilling contracts was temporary and due to the severe downturn
in the contract drilling economy. The resolution of this issue
therefore turns on whether there has been a change in CDC's
business or a break in the continuity of business activity.
A. Continuity of Business Activity
Section 382(a)(1)(C) precludes the carryforward of NOL's of
an acquired loss corporation where the loss corporation has not
“continued to carry on a trade or business” substantially the
same as that conducted before the acquisition. (Emphasis added.)
Respondent argues that implicit in this section is the
requirement that the acquired corporation must have been engaged
in an active trade or business at the time of the acquisition.
5(...continued)
originally conducted, the corporation has not continued
to carry on a trade or business substantially the same
as that conducted before such increase in stock
ownership. * * *
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